Correlation Between NexGen Energy and EnCore Energy

Can any of the company-specific risk be diversified away by investing in both NexGen Energy and EnCore Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining NexGen Energy and EnCore Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NexGen Energy and enCore Energy Corp, you can compare the effects of market volatilities on NexGen Energy and EnCore Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in NexGen Energy with a short position of EnCore Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of NexGen Energy and EnCore Energy.

Diversification Opportunities for NexGen Energy and EnCore Energy

-0.06

Correlation Coefficient

NexGen Energy  EnCore Energy

Good diversification

The 3 months correlation between NexGen and EnCore is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding NexGen Energy and enCore Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on enCore Energy Corp and NexGen Energy is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on NexGen Energy are associated (or correlated) with EnCore Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of enCore Energy Corp has no effect on the direction of NexGen Energy i.e., NexGen Energy and EnCore Energy go up and down completely randomly.

Pair Corralation between NexGen Energy and EnCore Energy

Considering the 90-day investment horizon NexGen Energy is expected to generate 1.28 times more return on investment than EnCore Energy. However, NexGen Energy is 1.28 times more volatile than enCore Energy Corp. It trades about 0.1 of its potential returns per unit of risk. enCore Energy Corp is currently generating about -0.05 per unit of risk. If you would invest  733.00  in NexGen Energy on September 14, 2024 and sell it today you would earn a total of  46.00  from holding NexGen Energy or generate 6.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

NexGen Energy  vs.  enCore Energy Corp

NexGen Energy

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NexGen Energy are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, NexGen Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

enCore Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days enCore Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, EnCore Energy is not utilizing all of its potentials. The new stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with NexGen Energy and EnCore Energy

The main advantage of trading using opposite NexGen Energy and EnCore Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NexGen Energy position performs unexpectedly, EnCore Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in EnCore Energy will offset losses from the drop in EnCore Energy's long position.

The idea behind NexGen Energy and enCore Energy Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.